Could an allowance be considered a gift or taxable income?

LOL. You know what you’re writing, at least to some extent, right? The questioner even specified the type. I could understand it if it were a woman asking, “Do I have to pay taxes?” but… What are you really trying to say?

There used to be a widespread view that allowances were subject to gift tax, but recently, more tax professionals have been saying they should be treated as business income or miscellaneous income. If it’s considered business income, you can also claim expenses, so things like clothes and shoes needed for dates could potentially be deducted. In that sense, it might be worth treating it as a business—essentially, the business of going on dates. Either way, consulting a professional is the safest option. Incidentally, the biggest difference between a gift and miscellaneous income seems to be whether there is “consideration” involved. Money earned through labor or providing a service is treated as miscellaneous income and subject to income tax. On the other hand, receiving property or money for free, without anything given in return, is considered a gift. So perhaps the reason more experts are now calling it miscellaneous income is that what was previously viewed as receiving money without providing anything in return is increasingly being seen as: Going on a date = the woman providing something in return. But is going on a date really consideration? I suppose some people may see it that way, but ordinarily, people go on dates because both parties want to. It’s not something you do in exchange for payment. Maybe the thinking has started to change when there’s a significant age gap, though.

It’s more of a loophole—or sophistry—but if you prepare a promissory note, it technically isn’t a gift. Specifically, have the man write his name and address in the “lender” section of a document stating, “I lent [amount] yen.” If there’s a tax audit, you can present it and insist, “I’ve only borrowed the money; I’ll pay it back someday.” In theory, it won’t be taxed. If the woman keeps the note and doesn’t give a copy to the man, he can’t demand repayment, and I don’t think it would put him at any disadvantage. You could also total up the allowance every six months or year and put the whole amount on a single promissory note. Hope this helps. P.S. When a tax audit actually happened, there was a woman who genuinely tried this. It was an idea given to her by a papa who was a tax accountant. Apparently, she asked several generous (well-paying) papas to make promissory notes retroactively and sign them, and managed to get through the audit.

If you’re that interested, why haven’t you ever Googled keywords like “papa-katsu taxes”? Adding this after reading Mack’s answer: Creating a fake IOU would make it tax evasion, not merely an unreported income issue. Helping someone do that would also constitute aiding and abetting tax evasion.